What is a total car loss? [How Insurance Works if Your Car is Totaled]

Whether you drive to work every day or rarely get behind the wheel, there is a good chance that you will eventually be involved in a car accident. In 2020, the police reported more than 5.2 million traffic accidents. If you are involved in an accident and your car is damaged, your insurer may declare it a total loss.

What is a total wrecked vehicle? This is when the repairs to repair your car will exceed its value or government thresholds. If this happens, the insurer will send you a check for the current cost. But the assessed value of your vehicle may not be enough to pay off your existing car loan or purchase another car.

Here’s what you should know about total loss after an accident and what you can do to protect yourself.

What is a total loss?

If you are involved in a car accident and have collision coverage, your insurance company may declare your vehicle a total loss. This means that the cost of repairing your vehicle will be more than the car’s cash value or exceed the state’s total loss threshold amounts. In some cases, the car may be totaled if the insurance company decides that it cannot be safely repaired.

If your car is a total loss, the insurer will send you a check for the actual cash value at the time of the accident. You can use the check to buy another car or for other expenses.

How do you know if your car is clogged?

If you have been involved in a car accident, you need to contact your auto insurance company immediately to begin the claims process. Your insurance company will send a consultant to assess the damage and estimate the cost of repairs. If the cost of repairs is too high, the insurance company will mark it as a total loss.

How expensive repairs should be depends on state law. In some states, such as Colorado, the value of the car is compounded if the repairs exceed the current cash value of the car. In other cases, a vehicle is considered a total loss if the physical damage exceeds a certain threshold of the vehicle’s value. For example, a car is a total loss in Arkansas if the repairs cost 70% of the car’s value. In Florida, the threshold is 80%.


Without a professional mechanical evaluation, drivers won’t be able to tell if their car is a total wreck. But a common misconception is that a car is automatically a total loss if the airbags deploy in a crash.

Air bags are expensive to replace — typically $1,000 to $5,000 to have them replaced and professionally installed after an accident — so they can add to repair costs and push a vehicle to the brink of total loss. However, airbags alone do not deploy to cause a full impact vehicle.

How much is your total car worth?

After the insurance adjuster declares your car a total loss, the insurance company will issue you a check based on the actual cash value of the car less your deductible. Insurers typically work with third-party providers to determine current cash value; the supplier will use factors such as the vehicle’s age, mileage and pre-accident condition to set the price.

If you disagree with the car insurance company’s estimate, there may be room for negotiation. You can ask the insurer what sources they used to determine the value of the car. If you can’t come to an agreement, some states allow you to hire your own appraiser to appraise the car.

If you financed your car, you may have a car loan. In some cases, the actual cash value of the vehicle may not be enough to pay off the car loan in full. If you don’t have breakdown insurance, you may have to cover the cost between the loan amount and the total value of the car.


Breakdown insurance is an optional form of coverage that pays the difference between the vehicle’s current value and the total amount you owe on your auto loan after an accident.

Who pays for a total car loss?

If your car is involved in an accident, how the claim is handled depends on who was at fault. If you are the at-fault driver, you only have coverage for your vehicle if you have purchased collision insurance. If you only have liability insurance, which is usually required by the state, you will have to cover the cost of replacing the car yourself.

If the other driver was at fault in the accident, you may be able to work with the other party’s insurance company to seek compensation.

Some drivers have collision and comprehensive insurance. If this is your case and the other party was at fault, you can use your collision coverage to file a car insurance claim and get reimbursed. However, your insurance company will then work with the other driver’s insurance and claim reimbursement. If this happens, you may be reimbursed for your policy deductible.

What to do after your car is written off?

Once your car is paid off, work with your insurance company to find out when you can expect reimbursement and what steps you need to take to get your rental car. When you file a claim and your car is totaled, the insurance company can raise your rates, so be prepared for a higher insurance premium.

In most cases, you cannot leave your totaled car. Once you settle the total loss, the car is owned by the insurer and they may decide to sell it for parts or at auction. Some companies will allow you to keep it, but this is at the discretion of the insurance company. If you keep your car, the insurance company will deduct the salvage value from the total loss.

frequently asked questions

What value does the insurance use for the total value of the car?

If your car is totaled, the insurer will determine its value based on several factors, including its age, the condition of the car, the mileage at the time of the accident, and the selling price of comparable cars in your area.

The value you get won’t necessarily match the price listed on a site like Kelley Blue Book. When determining the total value of a vehicle, companies often use third-party vendors who collect vehicle data to calculate the current cash value.

Does a total loss affect credit?

Although an accident where your car is declared a total loss can cause your insurance premiums to increase, the incident does not affect your credit.

The only way the car total will affect your credit score is if the total loss coverage from your insurance company wasn’t enough to cover the outstanding car loan and you couldn’t make the required payments. If you miss payments on a loan, even if you no longer own the car and the total amount is paid off, the lender will notify the credit bureaus about the late payments. Missed payments can do significant damage to your credit.

Will the insurance company pay for a rental car after a total loss? If so, how long?

Whether your insurance company will pay for a rental car after an accident depends on how your car insurance policy works. Car insurance does not automatically pay for the rental. Rental reimbursement coverage is an additional benefit that you can add to your policy for an additional fee, but if you’ve been trying to keep your premiums as low as possible, you may have missed it. If you’re not sure, check your policy to make sure you have the right coverage.

Is it worth buying a completely unprofitable car?

In some cases, insurance companies may allow policyholders to keep the car after it has been declared a total loss. The car owner can choose to repair the car or sell it, but the seller must inform potential buyers that the car has been lost in the past and the car will retain the scrap title.

A car that has been a total loss can be attractive because of its relatively low price—salvaged cars are significantly cheaper—but there are risks. The car may be more difficult to resell or trade in later. Many insurance companies refuse to insure salvage cars, so getting coverage can be difficult. You also need to consider repairs; even if the car looks great, it can be dangerous to drive.

The bottom line

What is a total car loss? A total loss is when your vehicle will cost more to repair than the actual cash value of your vehicle, or the repairs will exceed your state’s threshold. If your car is totaled, the insurance company will issue you a check for its cash value minus your deductible.

Keep in mind that not all drivers have collision and comprehensive coverage, so you may not be reimbursed for a total loss. If it will be difficult to replace the car yourself, contact your insurance company to get full coverage for your car.

You can get quotes from top providers in your area by using our best car insurance finder.

This article What is a Totally Lost Car? [How Insurance Works if Your Car is Totaled] originally appeared on FinanceBuzz.

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